XXXXXXXXXXBachelor of commerce (Accounting)
Auditing and professional practice
Account- cost of sales
You are part of the audit team assigned to the audit of Maidenhair Enterprises for the year ended 30 June 2020. The trial balance for this client is shown below.
Maidenhair Enterprises
Notes from last year’s audit file indicated that internal controls around revenue and current assets are strong, while controls around other accounts are generally weak. Tests of controls confirmed this is also the case for the current year. The preliminary assessment of materiality has been set at $5,000.
The senior auditor in your team has asked each team member to substantively test a different account. Your account is Cost of Sales.
Your task: Your task is to prepare a working paper/s to be included in the audit file, for your allocated account which is cost of sales The working paper/s must address the four points below.
1. Consider which assertions are likely to be most at risk for this account. Identify 3 relevant assertions, and briefly explain why these assertions are likely to be at-risk. In doing so, you should consider whether the account has increased or decreased compared with the prior year and consider the key risks generally applicable to this type of account.
2. Describe an audit procedure/s which would provide sufficient appropriate evidence for the identified assertions.
⇛It is recommended that you prepare your audit working paper using Microsoft Word and use the comment feature.
⇛Ensure that your working paper clearly identifies the account being tested, a relevant audit objective, relevant assertions, and the procedure/s to be used.
3. The senior auditor has asked you to select a sample of 5 transactions from your general ledger account for vouching. Access the general ledger detail for your account which is cost of sales and identify 5 specific entries to make up your sample. Consider the impact of your sample selection technique on the audit budget. Describe/illustrate your sample selection process. Provide a brief statement justifying your sample selection approach with reference to the Australian auditing standards.
4. Comment on whether you think vouching these 5 transactions will provide sufficient appropriate evidence for this account. Consider how material the account is and the level of detection risk that would be appropriate for this account. Consider the direction of testing, and whether it is appropriate for your assertions.
⇛You may like to address points 3 and 4 on a separate working paper, or include this on your existing working paper.
General ledger accounts for company, cost of sales is your account:
Pdf is separately attached.
Harvard referencing
Assignment should be considered Highly effective application of knowledge of problem solving and/or advanced analytical processes in different business contexts, Insightfully identifies, prioritises, and justifies pertinent issues in a business context. Uses relevant discipline-based theory, frameworks and principles to critically evaluate these issues, Evidences advanced capacity for critical thinking, evidenced by proposing, critically evaluating and justifying an effective and innovative business solution, Justifies an innovative/appropriate and cost-effective solution to a business problem, grounded in appropriate application and evaluation of highly relevant discipline-based theories, frameworks and principles and supported by credible sources of information, Confidently uses digital tools/channels to communicate effectively, accurately and professionally. Language choice and tone is professional, appropriate and effective. Consistently uses appropriate discipline based vocabulary.